How to Settle Tax Debt?

The Government of the United States expects its citizens to pay their income taxes to the Internal Revenue Service every year. There are companies in America where taxes are withheld from the wages of the individuals. This helps in avoiding the circumstance where individuals owe taxes to the IRS. Nevertheless, self-employed people and even the independent contractors are required to make estimated payments of tax amount. Not only in the United States, but this applies for citizens living throughout the world. If you are not able to pay off your taxes within time remaining, you might have to bear with severe penalties. You must not take very long to resolve tax debt because the longer you take the more costly and difficult it will turn out for you. It is necessary for you to have a complete understanding of the ORC tax collection procedure and the options that you have for settling the payment of taxes owed. Find a counselor for tax debt help near me.

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Pay or You Might have to Bear with Penalties

Getting hold of the right procedure of dealing with taxes owed to the IRS is important because if you do not pay off the taxes owed on time, the IRS might file a Notice of Federal Tax Lien. These types of tax liens are generally reported on credit reports of individuals. they serve as negative information resulting in complete drop in the credit score of individuals. There are other enforced collection actions that the IRS can resort to, even if it does not file a lien. The IRS can take money from your wages, bank account and other forms of income.

What happens if you do not File Taxes?

If you do not file taxes with the purpose of evading tax payment, it would not serve as a valid option for you. Many people are of the view that if they do not file their taxes, they would not have to make tax payments. But this is not the truth. You might have to pay a very steep failure-to-file penalty in case you do not file your tax return within the due date. This also includes the extensions. Penalties charged are generally 5% every month or part of the month when the tax return is late. Penalties might go up to 25% of tax amount that is not paid within the due date.

Tax Debt Relief- Knowing about the Offer in Compromise

Just like death, tax payment is one of the immutable facts of human life. There are people who have ambivalent feelings when it comes to paying taxes. The money that is paid as tax by the tax payers is used by the government for a number of fruitful activities. Every citizen benefits from the money paid by taxpayers. However, there are very few people who actually relish the fact of parting with their hard-earned income. There are situations when taxpayers do not have enough financial resources to pay off their taxes and they get into tax debt.

What is an Offer in Compromise?

With an Offer in Compromise, the government hopefully accepts an offer of only a small portion of the tax that is owed by the taxpayer. Perhaps, the Internal Revenue Service even accepts as little as 1% of the total tax amount owed by the tax payer. The Offer in Compromise should not be considered a magical solution, though. There are several procedures and facts that need to be considered in order to make the Offer in Compromise a successful and viable option for taxpayers.

The Requirements

There is not a single individual who would not like to pay just a small portion of his or her taxes owed. Nevertheless, prior to jumping into the procedure, it is necessary to review the ones who actually qualify. Internal Revenue Service has laid forward just one or two qualifying situations and they are:

  • The IRS requires reason to believe in the fact that it will not be able to collect the total taxes owed at present or in the future.
  • Exceptional circumstances do exist making it economically difficult and unfair for people to pay off their taxes in full.

The Procedure

The ones who qualify for the Offer in Compromise should go for a formal procedure that is not free. They must get IRS Form 656 by paying $150 and also Form 433-A. Form 133-A is the Collection Information Statement. The application procedure takes around a year and there is additional information required by the IRS. This information includes vehicle registrations, bank records, pay stubs and other important financial information. The ones who are approved need to fulfill some other requirements as well. Government can even revoke the Offer in Compromise if certain requirements are not met by the approved individuals. Getting an Offer in Compromise from the Internal Revenue Service for paying large tax obligations is a time-consuming procedure but it is highly beneficial for the ones who are in tax debt.

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Government can even deny the Offer in Compromise if certain necessities are not met by the affirmed people. Getting an Offer in Compromise from the Internal Revenue Service for paying substantial assessment commitments is a tedious strategy however it is exceptionally useful for the ones who are in duty obligation.This data incorporates vehicle enlistments, bank records, pay stubs and other vital money related data.

Understanding Tax Debt

People who do not pay their taxes for a very long time are quickly pressurized with the trouble of paying off large amounts of money within a very short span of time. One important misconception among people is that the bankruptcy filing on taxes is of no use. People are of the view that even if they file bankruptcy, the taxes that they owe are never discharged. But this is not the reality. When people are able to meet specific requirements, filing bankruptcy on tax debt does work. This means that people will be able to discharge the taxes owed successfully. Nevertheless, there are situations or cases when only the income tax is discharged and not the other tax debts of the IRS. The taxes that are generally not discharged by filing bankruptcy include penalties and payroll taxes. It is important for individuals to meet certain circumstances and conditions for discharging their taxes and there are even exceptions to the regulations.

Why is it Important to File Bankruptcy?

There are different issues that generally serve as the conditions that need to be met. However, it is important that the tax return was actually filed and there was no tax evasion or fraud. Back taxes owed should be minimum three years old. It is only because of this reason that discharging taxes owed does not work for different people. It is also the reason why people find it challenging or tricky to come up with the right timing for filing bankruptcy on the taxes owed. When appropriate conditions are successfully met, the taxes owed can easily be discharged. The taxes might not be discharged depending on circumstances but filing bankruptcy might offer substantial relief. Filing bankruptcy can help people by offering them financial relief based on their circumstances.

Consulting an Experienced lawyer is also Important

It is also very important to consult an experienced and professional bankruptcy attorney prior to making a decision on filing bankruptcy. A bankruptcy lawyer should also be contacted prior to seeking out other viable solutions and potential alternatives. There are different circumstances and conditions which might apply and this has been mentioned above. Therefore, individuals need to analyze their financial image carefully prior to moving ahead with filing bankruptcy and tax debt. Filing bankruptcy is an effective solution for discharging taxes owed but there are different limitations that also need to be considered when moving into this procedure.

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